The corporate logo of Flint Energy Services Ltd. (TSX:FES) is shown. Canadian oil and gas contractor Flint Energy Services Ltd. is being acquired by a U.S. construction giant for $1.25 billion in cash. | CP

CALGARY - Canadian oil and gas contractor Flint Energy Services Ltd. is being acquired by a U.S. engineering and construction giant for $1.25 billion in cash, reflecting booming growth in Alberta's oilsands and North American shale gas.

San Francisco-based URS Corp. announced Monday it had struck a friendly deal to buy Flint and will also assume about $225 million in the Calgary company's (TSX:FES) debt.

The deal gives URS significant new customers in the oilsands industry in northern Alberta and growing shale gas regions of Western Canada and the United States.

"Once the deal closes, we give them an immediate and automatic entry into the oil and gas construction and maintenance market across North America," Guy Cocquyt, Flint's vice president of communications, said in an interview.

Flint gets about 80 per cent of its revenues from Western Canada and the rest from the United States. Of its Canadian revenues, about half come from heavy oil and bitumen development in northern Alberta, said Cocquyt.

"The acceleration of investment in Alberta, primarily in the oilsands region, is of interest to a lot of international companies. Projects in oilsands require significant amounts of engineering, technical design and environmental specialization that URS can bring to the table," he said.

Meanwhile Flint is well known for building big oilsands projects.

"We've worked on pretty well every major oilsands project in the Fort McMurray area and have been active there for perhaps the last 15 years."

Once the deal closes, URS (NYSE:URS) will be able to provide the "full EPC package" — engineering procurement and construction — to the oil and gas industry, something that neither company could do on its own.

The $25-per-share deal represents about a 70 per cent premium to Flint's average volume-weighted share price over the past 30 days.

Flint shares haven't traded at that level since the summer of 2008, before the financial crisis hit, said PI Financial analyst Roy Ma.

"The fact that they can get a bid that can return shareholders back to June-2008 levels, I think most people would agree that's a decent outcome," he said.

Flint shares most recently closed at $14.90 on the Toronto Stock Exchange; markets were closed for the Family Day holiday on Monday.

The deal is slated to close in the second quarter. The company will become a new URS division and will be run by current Flint president and CEO Bill Lingard.

Flint is expected to add about $3.5 billion to URS' book of business once the deal closes.

There's very little overlap between URS and Flint, so a minimal number of jobs will be affected, said Cocquyt.

URS has grown through acquisitions over the past few years, and its preference has been to keep those businesses fairly independent.

"They recognize that Flint has got a good system," said Cocquyt.

"They want to keep that as intact as possible, so that we can continue to make money for them."

With a number of oilsands expansions planned in the next few years and shale gas production growing across North America, U.S., Chinese and other foreign players are looking to acquire Canadian companies to cash in on what is expected to be explosive growth in the energy sector.

Martin Koffel, chairman and CEO of URS, said expanding in oil and gas has been "a long-standing strategic priority for URS."

"Flint is one of North America's leading fully integrated production and construction services providers to the oil and gas sector, with many long-duration construction contracts and multi-year maintenance agreements. Through this combination, URS will be well positioned in segments of the oil and gas industry that we expect to have attractive margins and growth rates."

Lingard said being part of URS will allow the Canadian company to tackle more projects at a time, leading to higher revenues.

"Flint's employees should also benefit from and enjoy more opportunities to work on a wider range of complex projects in both in both Canada and the United States."

Flint employs 10,000 people and is a key player in building and servicing oilsands projects. Its operations stretch from northeastern B.C. and Alberta down to Texas.

During the third quarter, Flint reported net earnings of $17.3 million, or 37 cents per share, up from $9.2 million, or 20 cents, in the same 2010 period.

Revenue in the three months ended Sept. 30 was $505.3 million, up from $406.5 million.

URS provides engineering, construction and technical services for power, infrastructure, industrial and commercial, and federal projects and programs. It has some 47,000 employees in more than 40 countries.